Even if all your taxes have been paid you would still lose out on certain benefits if you do not file your income tax return by the due date.
Cannot revise a belated return
"If you file your income tax return for FY 2015-16 after the due date you cannot file a revised return later in case you discover a mistake in the one originally filed", says Kuldip Kumar, Partner and Leader Personal Tax, PwC. This essentially, means that in case you discover that you had forgotten to declare some income in the return or made a wrong statement and you later wish to file a corrected or 'revised' return you cannot do so for FY2015-16 in case the original return is belated, he explains. In such a case, if your mistake is discovered by the income tax assessing officer then he would not accept a 'revised return' and the mistake would be penalised as per rules. In effect you lose the facility of admitting to a mistake on your own and correcting it without being penalised - wherever a penalty is applicable.
The rule that belated returns cannot be revised comes from Section 139(5) of the Income Tax Act. However, it is to be noted that this section has been amended - w.e.f. April 01, 2017 - by Budget 2016 to allow even those who file a belated return to revise that return later. So it would be possible to revise belated returns filed after 1.4.2017 i.e. for FY2016-17 but returns filed for FY 2015-16 are not covered under this amended provision. Hence, there is no scope of revising a return filed after the due date July 31, 2016 for the FY 2015-16, clarifies Kumar.
Loss in interest on refunds
In case you claim a refund in your return of any advance tax paid/TDS, you would lose some of the interest (currently 6% per annum paid by the tax department) on such refund. The interest on refund is normally computed from April 1 of the assessment year (the year immediately following the financial year for which the return is filed) till the date of grant of refund, says Kumar. However, in case of a belated return (i.e. return filed after due date) interest is computed from the actual date of filing the return till the date when refund is granted. This means loss of the interest that would have been paid for the period April 1 till date of filing the return. Even if you file the return one day after the due date you would be losing interest for at least four months - April, May, June and July (presuming due date is not extended beyond July 31).
No carry forward of losses
If you file a belated return you cannot carry forward losses (except loss from house property). "Losses under the following heads of income: Income from business and profession including speculation business, capital gains, and income from other sources cannot be carried forward in case a belated return is filed by the tax payer. The return filer will not be allowed to carry forward these losses even if all taxes have been paid in time if the return is belated," says PwC's Kumar.
Delayed return where tax remains unpaid
If you have any unpaid tax liability, filing your return after the due date would result in levy of penal interest @ 1% per month from the due date of filing the return till the actual date of filing. This would be a heavy and avoidable payout. What is more, tax authorities can initiate prosecution if the return is delayed beyond the relevant assessment year and the amount of unpaid tax exceeds Rs. 3,000, he adds.
If return is not filed even by end of relevant Assessment Year
If you do not file your tax return even by 31st March of the relevant assessment year (i.e. the year immediately after the financial year for which the return is to be filed) but no taxes are due, a penalty of Rs. 5,000 can be levied by the tax authorities if you are unable to provide a reasonable cause for the delay, Kumar adds.
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